The implications and the effects of debt write-offs
Editorial
THE CAVEAT given to poor Third World countries which are recipients of handsome debt write-offs from the industrialised nations and the international financial agencies should not be taken lightly. The warning that countries newly-relieved from huge debt burdens should implement strategies for economic reform and for combatting poverty was pronounced by American President Bill Clinton and Cabinet Secretary Ms Clare Short of Britain's Labour government. Those nations in the category of the Highly Indebted Poor Countries (HIPC), such as Uganda and Guyana, will be among the first to benefit from almost total debt write-offs within the next few years. However, political administrations in these nations will have to pay more than lip service to the objectives of economic reform and poverty alleviation, if they hope to continue basking in the good graces of the international community. This concept is understood by many underdeveloped countries, which for decades have suffered the twin ailments of servicing a crippling debt burden while most of their people lived below the poverty line. The Benin Minister of Finance, Bio Tchane, himself a governor of the International Monetary Fund (IMF), argued in Washington recently for the revamping of the IMF's Enhanced Structural Adjustment Facility (ESAF) so that African nations would be better able to tackle poverty. "Our wish list is one thing, reality is another. We are not asking for money to reward laziness or to subsidise laggardly activity of a country. We are asking for the minimum necessary to do what we have to do." Most insistent on economic reform as a means of combatting poverty is Mr James Wolfensohn, President of the World Bank. Speaking at a press conference in Washington DC two weeks ago, Wolfensohn said that central to the challenge of reducing poverty would be the tasks of completing reforms of legal systems, justice systems, financial supervisory systems, and ending government corruption. For over a decade, countries of the south have been imploring the rich nations of the north and the international financial institutions to relief them of their dragging debt burdens, which in some situations swallow one-third or more of their earnings. These countries have argued that were they not saddled with servicing foreign debts they would be better able to provide the basic necessities such as adequate nutrition, potable water, health care and education for their people. During the 1990s, significant instances of debt write-off and debt-forgiveness by members of the G-Seven and other industrialised countries were granted to poor nations. And while countries like Guyana were grateful for every respite from debt payment offered by countries such as the United States, the United Kingdom, Canada and France, the debt stock still remained a millstone that prevented the further development of infrastructure and the building of a social sector that would impact positively on the lives of the most vulnerable in society. Now, with the pledges from debt write-offs from the World Bank, the IMF, the United Kingdom and the United States, the burdened nations of the world have some hope at last of fashioning a future that would not be characterised by hunger, illiteracy, preventable diseases and the deprivation of the intellect.
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